St. Helena’s General Fund is stable, according to financial report card

New revenues have stabilized St. Helena’s General Fund, but a historic lack of investment in city buildings and roads are still cause for concern, according to a new financial report card.

The California Municipal Financial Health Diagnostic gives mostly high marks to St. Helena’s General Fund, which has benefited from new sources of revenue that have produced a healthy reserve of 34 percent – 9 percent higher than the City Council’s target of 25 percent and well within the acceptable range for small cities.

The areas of concern, such as a lack of investment in aging city buildings and roads that are among the Bay Area’s worst, don’t come as a surprise, agreed City Manager Mark Prestwich and Finance Director April Mitts.

The report card was prepared by municipal finance experts associated with the League of California Cities and the California Society of Municipal Finance Officers. It’s intended as an objective tool to help cities and counties gauge their fiscal stability compared with other local governments around the state.

Prestwich said St. Helena’s report card will be valuable to the SHAPE Committee, which is evaluating city facilities, and to members of the community who want to know how the city is doing.

“This document helps set the table for the conversation that the community will have about its deteriorating assets, but also about the available financing that is emerging to address some of these deficiencies,” Prestwich said.

Mitts noted three main lessons from the report: The General Fund is stabilizing, asset recapitalization is still a concern, and the city now has a “living, breathing document … to show us where we are financially, how we got here, and what we have to look at for the future.”

The report awards color-coded ratings for 14 financial indicators: green for “Healthy,” yellow for “Caution” and red for “Warning.” St. Helena received 11 greens, three yellows and no reds.

The generally high marks can be attributed to new ongoing revenue from Measure D ($1.2-$1.4 million per year in unrestricted sales tax revenue for the General Fund), Measure T ($600,000 per year in sales tax revenue for road repairs plus a $379,000 General Fund match), SB 1 ($116,000 per year for road repairs) and the Las Alcobas hotel (projected to generate $1.2 million per year).

“If we’d looked at this tool two years ago – before Measure D, before Measure T, before Las Alcobas – I think we’d have some different ratings,” Prestwich said, adding that the report card can be updated periodically to reflect changing financial circumstances.

Due to the new revenue, financial projections show General Fund surpluses trending upward over the next few fiscal years, reaching 12.9 percent in 2020-2021.

Areas of concern

The first “Caution” involves a historic lack of investment in city buildings. Maintenance budgets were cut during the recession, and addressing the poor condition of facilities like City Hall, the police station and the Corporation Yard have only recently become a high priority for the city.

The SHAPE Committee is studying those facilities, and consultants are preparing a needs assessment that will estimate the cost of repairing or replacing them.

The report concerns only the General Fund, not the separate water and wastewater enterprise funds. However, the transfer over two fiscal years of $1.6 million from the General Fund to the water enterprise to help fund the removal of the Upper York Creek Dam resulted in the second “Caution” rating.

Prestwich said the transfer, approved by the council in a 3-2 vote in June, reflects what a majority of the council saw as a unique one-time situation, with the understanding that using the General Fund to subsidize enterprise funds is generally considered a bad idea.

The yellow rating for “Service Level Solvency” reflects years of under-investment in city buildings and roads, as well as the potential for major expenses if it ever becomes necessary to transform the part-time fire department into a more expensive full-time department.

The first two concerns are already being addressed, by the SHAPE Committee and by new road funding from Measure T and SB 1.

As for the warning about the fire department, St. Helena has been lucky to be able to sustain the part-time department, which frees the city from the financial liability of pensions for retired firefighters, Prestwich said.

However, if it becomes impossible to attract a sufficient number of on-call firefighters who are available to respond to local calls, the fire department could be forced to go professional, which would put a new financial strain on the city.

Financial policies

The report card also evaluates St. Helena’s financial management policies. The city has tightened up its financial controls over the past few years, ever since revelations came to light in 2015 about financial mismanagement under previous city administrations.

The report card shows that most of the city’s financial policies have been introduced or updated since then, including many that were recommended by an annual financial audit and a forensic audit of the flood control project.

Other financial policies that have been recommended over the last few years are in draft form or still waiting to be drawn up.

The report is available at cityofsthelena.org under the agenda for the next council meeting at 6 p.m. Tuesday, Dec. 12, at Vintage Hall. It will also be presented at the SHAPE Committee meeting at 6:30 p.m. Wednesday, Dec. 13, at Vintage Hall.